Hello everybody,
Im a day trader with three years of experience in the market. Now I like to do swing trading in futures market holding the buy for 5 to 10 days.
But Im afraid of next day’s big gap downs which could cause a big 3% to 5%… even 10% loss sometimes.
Question 1: How can i solve this issue & how can i come out of this fear positively.
Question 2: My overall capital is around 8 lakhs. How many lots I should buy in futures market.
Pls advice.
Buying a put option along with a futures contract for Reliance, with an expiry date of 31st October, is illustrated here. Please note that this is for educational purposes only and not a recommendation. The strategy was prepared using Sensibull, and I do not take any responsibility for the accuracy of the information provided.
There is no point of buying a futures contract along with a put option. It is equivalent to simply buying just a call option. It is better to buy a single call option compared to long futures + put option, because not only you’ll save half brokerage and other transaction charges, you’ll also save on impact cost (bid-ask spread) by dealing with just 1 contract compared to 2.
There is point. Call option will decay, future will not.
There is no difference. The put option will decay in your case.
The put option is not for making profit, it will just act as hedge.
Buying futures and put simultaneously is same as buying a call options. You are unnecessarily blocking extra margin and may be even expenses.
In your example, buy 2740ce of reliance and it will give you same payofff with same risk. If it doesn’t then there is arbitrage opportunity, which is never possible for retailer.
Thank a lot. You have given me a good knowledge about hedging.
Only take fully hedged positions when swing trading, I’ve been able to generate decent profits in back-testing credit spreads and condors.
Since you’re an intraday trader, I assume you will be monitoring the positions in realtime, otherwise it’s necessary to close out the position when making loss equal to 100% of take profit target. Profit target should be at 50-75% of max profit.
Currently there’s no option for a combined leg stoploss in Zerodha or Sensibull, so people not monitoring their trades all day will have to resort to using the API.
